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Ethanol production may raise food prices
Minneapolis-St. Paul Star Tribune


February 11, 2007
Sunday PM

Full fuel tanks could mean many more empty bellies within the next two decades, according to new research.

The number of hungry people worldwide could grow by more than 50 percent by 2020, as corn, sugar and other food staples are increasingly devoted to making fuel here and abroad, according to projections by economists C. Ford Runge and Benjamin Senauer.



The same trend would bring much higher food prices to the United States and the rest of the developed world, the economists predict. The sharp increase in world hunger isn't inevitable, however. The economists say increased conservation could do more to wean the United States from foreign oil than all the corn-based ethanol plants now online.

Corn and ethanol producers dispute the claims.

"Based on the numbers and the amount of ethanol we're producing, there's not a negative implication for corn destined for the rest of the world," said Jeffrey Zeiger, executive director of the Alternative Fuels Institute, a nonprofit group in Watertown, S.D.

However, pork, poultry and egg producers are beginning to sound alarms of their own about ethanol's impact on food prices.

Some aspects of the scenario laid out by Runge and Senauer already are coming to pass. This winter's imposition of tortilla price controls in Mexico in an attempt to quell unrest is an early indication of the consequences of food price shocks, the two write.

"These impacts are (already) being felt right at America's doorstep - in Mexico."

Ethanol plants are on pace to consume more than 35 percent of the U.S. corn crop within a few years, and their growth rate has attracted the notice of food producers who rely on corn in the production of everything from cereals to butter and meat.

Richard Bond, president and CEO of chicken producer Tyson Foods, said last week that the country must "carefully consider the negative and unintended consequences of over-using grains" for fuel.

"Companies will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food," Bond said. "If left unaddressed, the bigger long-term issue will be the availability of U.S. and global grain for protein and other foods."

In a speech last year, Warren Staley, CEO of Cargill, the commodities trading firm that also has invested millions in ethanol plants, said fuel shouldn't displace food as the primary reason for growing crops.

"We have to look at the hierarchy of value for agricultural land use: Food first, then feed and last fuel," Staley said. "Today we are providing subsidies to fuel uses while often erecting barriers to new food and feed technologies."

Zeiger of the Alternative Fuels Institute rejects the argument that hunger will rise worldwide as the use of biofuels increases.

U.S. food prices are bound to rise in the short term as millions of tons of corn are diverted to new ethanol plants. But new technologies for producing ethanol from other crops or grasses will ease the need for corn, Zeiger said.

Spurred by high oil prices and large government subsidies, ethanol production has been growing fast, with 110 U.S. ethanol refineries running at the start of 2007. From September 2005 through August 2006, the USDA reported 1.6 billion bushes of corn went to U.S. ethanol plants, or 15 percent of the crop.

But some 73 more plants are under construction, or an increase of two-thirds in less than two years when the new facilities come online by 2008. Feeding those plants will raise total ethanol demand, "requiring 35 percent of the total corn crop even in a good harvest," Runge and Senauer write.

While researchers are working on ways to make ethanol from switch grass and prairie grasses, breakthroughs might be years or decades away.

Lester Brown, president of the Earth Policy Institute, a Washington think tank, said it might take a sustained rise in food prices to change policymakers' thinking.

"What we may see before too long is a consumer response, kind of a backlash against the ethanol industry," Brown said.

At a recent agricultural conference, Brown said, soybean growers, pork and poultry producers agreed that higher corn feed prices will inevitably lead to higher food prices.

"When you think of what's in your refrigerator, it's stuffed with corn products - the meat, the butter, the eggs, the ice cream" all depend on corn feed, Brown said. "There may be 100,000 corn growers in the country, but there are 300 million consumers."

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